“Do you take plastic?”
There was a time when consumers were asking that question in Retail outlets around the world. Nowadays, the ability to pay for goods and services with a debit or credit card is so commonplace that consumers simply assume that card acceptance is available virtually everywhere.
It wasn’t always like this but several decades of investment has built the card payment infrastructure to its current state. However, despite the continued growth in consumer payment transactions, card payments does have its drawbacks.
The level of fees paid by merchants has been a long standing area of contention, often resulting to protracted legal action to enforce greater billing transparency and reductions in overall fee costs. Another area of serious concern is the dramatic increase in card and account fraud, clearly aggravated by consumer behavior changes during the pandemic. Of course, the quest for ever simpler and more secure payment options is of great interest to many consumers.
There has been a lot of payments innovation over the years including stored value cards, digital wallets, and bio-metric authentication. However, many of these schemes piggyback on the card infrastructure or achieve only limited levels of success. In most industries technology has been reinventing itself at accelerating rates but this is not the case with card payments. This begs the question – “Is the card itself the bottleneck to change?”
Putting aside the entire settlement cycle there are several key elements that a truly alternative consumer payments option needs to address. Firstly, the consumer needs to have some form of payment token and authentication method. Additionally, the alternate payment scheme needs to ensure the secure acquisition and routing of the payment to the appropriate institution for authorization.
The advent of smartphones and wearable computing, coupled with the growth of real time account to account payments is already proving to be an interesting possible alternative to card payments. Some adoption rate projections suggest that account-based payments could notionally obsolete card-based payments.
It seems that the real hurdle to obsoleting card payments is a commercial issue, not a technical one. As long as the new entrants into the consumer payments market all seek their own “magic bullet” then they are most likely to be left nibbling around the market share of the traditional card brands. The last thing consumers want is to be drip-fed an endless array of different payment options with no clear indication of convergence and interoperability.
The electric car market provides a great comparison in this regard. In an age of climate change and excessive wastage it seems obvious that governments should demand all electric cars sold in their country to have the same charging connection. The cost and timescales to create an effective charging stations infrastructure is immediately reduced, and consumers would have greater confidence to switch to electric cars. I have no doubt that were the governments of a few of the major market countries to take this bold step it would be universally applauded and the card manufacturers would deliver the requisite standards in a heart beat.
The US market saw a strong consortium of banks cooperate in the launch of Zelle as a competitive counter to Venmo. However, the really big question is whether the banks, Fintechs, and Retailers can cooperate to deliver a single, ubiquitous consumer payments option that can move us beyond the 70 years history of plastic cards.
In today’s highly competitive Retail Payments market, there is no margin for error. To be successful, payments organizations need the very best technology, the right skills and experience, and the commercial agility to rapidly exploit any opportunities. It is a fact of business-life that all organizations have their ups and downs. However, the smart organizations continually pay attention to the critical factors that reduce the likelihood of ‘nasty surprises’, while also creating the best chances for accelerated success.
A simple ‘roll the dice’ strategy cannot ensure a future of strong growth, even if that’s how you have always ‘played’ before. The availability of powerful payment solutions like TANGO, the effectiveness of DevOps and Agile methodologies, and the perpetual shift in consumer demands are combining in a perfect storm. Unless of course, your organization can transform itself to thrive in this new era of Retail Payments.
Interestingly, the humble "Snakes ‘n Ladders" game provides a great metaphor for the ups and downs of a modern Retail Payments business.
SEEK COMPOUNDING GAINS
Fortunately, some business gains lead directly to further gains with a significant amplification of the overall benefits. Being more competitive comes from being able to learn and change more quickly than your competition. Using the TANGO micro-services payments suite delivers all the flexibility and commercial agility you need. This is clearly a crucial benefit. Additionally, with TANGO you can reduce your time and costs for compliance, support a wider range of consumer payments types, and easily form new business partnerships for accelerated growth. One ‘ladder’ leads to another, and another. Lucky dice throws aren’t guaranteed - but smart planning can, and does, make them more likely.
The latest company and industry news from Lusis Payments.